THE NEW MAP OF ECONOMIC GROWTH AND …At the national level, a scarcity of new businesses implies a future of reduced economic dynamism. New businesses play a disproportionate role

Economic Innovation Group | 1

May 2016

THE NEW MAP OF ECONOMIC GROWTH AND RECOVERY


CONTENTS

02

04

26

Introduction

Findings

04

12

The 2010s recovery was marked by a collapse in new business formation.

21

Conclusion

Employment gains from 2010 to 2014 were far more geographically concentrated than in previous recoveries.

The country’s most populous counties powered the 2010s recovery.


INTRODUCTION

The U.S. economy is in a constant state of evolution, but recessions tend to bookend

distinct eras of growth and development. The Great Recession was no different. The

ongoing expansion continues to take shape, but it so far has been characterized by

deep economic anxiety persisting alongside steady headline growth. Getting to the

bottom of that paradox motivated this report.

This analysis surveys the economic landscape emerging from the

Great Recession and compares it to previous recovery periods. It

identifies differences in the strength and geography of county-

level growth in employment and business establishments — two key

markers of economic dynamism — and uncovers three significant

transformations in the economy. The first and most unambiguously

troubling is a collapse in the number of new firms in the economy.

The second is the increasing geographic concentration of recov-

ery-era businesses and jobs into a smaller number of more populous

counties. The third is the shift in the counties driving the nation’s

economic recoveries from smaller to larger ones.

Together, the findings capture an economy veering towards a less broadly

dynamic, less entrepreneurial, and more geographically concentrated equilibrium

— more reliant than ever on a few high-performing geographies abundant in talent

and capital to carry national rates of growth. Even in the relatively short period of

time analyzed here, patterns have reversed. Large urban counties dominate where

they once lagged, while small counties have nearly disappeared from the map of

recovery altogether.

At the national level, a scarcity of new businesses implies a future of reduced

economic dynamism. New businesses play a disproportionate role in

commercializing innovations, stoking competition, and driving productivity growth.

They also create the bulk of the nation’s net new jobs and provide the extra demand

that is critical to achieving wage-boosting full employment.

What is more, the geographically uneven nature of the collapse in startups implies

that wide swathes of the country will soon be contending with the consequences of a

missing generation of enterprise.

The findings capture an economy veering towards a less broadly dynamic, less entrepreneurial, and more geographically concentrated equilibrium.


Many communities will see fewer employment opportunities as a result, and

depressed entrepreneurship will leave their local economies more vulnerable to the

downsides of inevitable economic shifts to come.

Taken in sum, these findings suggest an economic future that may look very

different from the recent past — one in which growing geographic disparities and

diminished business dynamism become increasingly urgent concerns. In response,

the economic solutions and development strategies of the future must focus on

removing barriers to entry for new firms and fostering local ecosystems of

investment and entrepreneurship throughout the country. This report aims to raise

awareness of these pressing policy concerns.

This study draws on the most recent publicly available data from the U.S. Census

Bureau’s County Business Patterns program. It compares the rate and geography of

the country’s economic growth on two metrics, the number of jobs and the number

of business establishments, over the first five years of the most recent three

recoveries (1992 to 1996, or “the 1990s;” 2002 to 2006, or “the 2000s;” and 2010 to

2014, or “the 2010s”). Additional data points cited here come from the Census

Bureau’s Business Dynamics Statistics and Population Estimates programs.

METHODOLOGY


FINDINGS

Hundreds of thousands of new business establishments remain missing. The fall-off in new business establishments was directly due to a lack of startups rather than a spike in closures. Nearly three in five counties saw more business establishments close than open from 2010 to 2014.Only one-quarter of all counties added business establishments at the same rate as the national economy.Twenty counties alone generated half of the country’s new business establishments.

I.II.

III.

IV.

V.

The 2010s recovery was marked by a collapse in new business formation.

Hundreds of thousands of new business establishments remain missing.I.

The 2010s recovery stands out for the scarcity of new business establishments

opening in the wake of the recession. Establishments are defined as single physical

locations — with employees and owned by firms — where business is conducted or

services and operations are performed. They often serve as the physical

manifestation of the country’s economic

development and are concrete signs of economic

growth for the communities in which they open. The

1990s recovery was fueled by a net increase of nearly

421,000 business establishments, a 6.7 percent

uptick. The 2000s recovery saw a similar increase of

400,500 business establishments, or a 5.6 percent

uptick. By contrast, over the first five years of the

2010s recovery, the number of business

establishments in the United States increased by

only 166,500, representing a meager 2.3 percent

expansion. Had they increased at the 1990s rate, 496,000 new business

establishments would have opened between 2010 and 2014 — 329,000 more than

actually appeared.

1992-1996

2002-2006

2010-2014

100K 200K 300K 400K 500K0

420,850

400,390

166,460

Figure 1. Net change in U.S. business establishments


The fall-off in new business establishments was directly due to a lack of startups rather than a spike in closures.

II.

The muted increase in new business establishments at the national level was not due

to a universal decline in the rate of establishment openings (even though the rate is

in long-term decline). One-fifth of all U.S. counties actually saw faster increases in

business establishments from 2010 to 2014 than from 2002 to 2006. Rather, subdued

national-level growth was the product of a geographically uneven collapse in new

business formation that set in across wide swathes of the country but left other

corners relatively untouched.

FIRMSESTABLISHMENTS

600K

500K

400K

300K

200K

100K

0

19

77

19

80

19

86

19

95

20

04

20

10

19

83

19

92

20

01

19

89

19

98

20

07

20

13

900K

800K

700K

600K

500K

400K

300K

200K

100K

0

19

77

19

80

19

86

19

95

20

04

20

10

19

83

19

92

20

01

19

89

19

98

20

07

20

13

Openings Closings DeathsBirths

Figure 2. Establishment and firm openings and closings over time

The left panel of Figure 2 shows that the modest net increase in business

establishments at the national level was due to a steep decline in the rate of

establishment openings rather than a spike in establishment closings. The scarcity in

establishment openings, meanwhile, was directly related to a collapse in new firm

formation, or startups (right panel). The two concepts are distinct (firms are the

corporate entities with paid employees that own physical establishments), but they

move closely together.1

1. Both remained well below historical norms through 2013, the most recent year for which data on firms is available from the U.S. Census Bureau’s Business Dynamics Statistics program.

Over the 1990s and 2000s recoveries, on average 1.27 firms were born for every firm

that closed each year. Over the first four years of the 2010s recovery, that average fell to

exactly 1.00 — barely replacement rate.


Figure 3. Net annual change in the number of firms in the United States

0 19

90

19

94

19

98

20

02

19

92

19

96

20

00

20

04

20

07

20

12

19

91

19

95

19

99

20

03

20

06

19

93

19

97

20

01

20

05

20

08

20

13

-50K

-100K

50K

100K

150K

20

09

20

10

20

11

Nearly three in five counties saw more business establishments close than open from 2010 to 2014.

III.

The proportion of counties seeing negative business establishment growth during

periods of national expansion has increased steadily over the past three recoveries.

Over the first five years of the 1990s recovery, 17 percent of counties continued to see

net declines in business establishments. From 2002 to 2006, that figure rose to 37

percent — and had more than tripled to 59 percent by the 2010s.

Figure 3 depicts the net difference between firm births and firm deaths annually in

the U.S. economy. Even in times of recession, the economy has traditionally

produced more new firms than dying ones. That changed dramatically with the

Great Recession, which saw firm deaths outpace firm births for the first time on

record. In fact, as of 2013, the total number of firms in the U.S. economy still

remained below 2004 levels.2 This is no doubt related to the nature of the recession,

which was precipitated by a financial crisis and thus had deeper ramifications on

credit markets, household wealth, and other entrepreneurship-related factors than

the prior two recessions.

2. Calculated using the U.S. Census Bureau’s Business Dynamics Statistics’ Firm Characteristics “Firm Age” data table.


Figure 4. Percent of counties losing business establishments during national recoveries

Figure 5. Net change in business establishments from 2010 to 2014

PERCENTAGE OF COUNTIESLOSING JOBS

1992-1996

2002-2006

2010-2014

PERCENTAGE OF COUNTIESLOSING ESTABLISHMENTS

14% 17%

37%28%

31% 59%


1992-1996

2002-2006

2010-2014


14% 17%

37%28%

31% 59%


1992-1996

2002-2006

2010-2014


14% 17%

37%28%

31% 59%PERCENTAGE OF COUNTIES

LOSING JOBS

1992-1996

2002-2006

2010-2014


14% 17%

37%28%

31% 59%


1992-1996

2002-2006

2010-2014


14% 17%

37%28%

31% 59%


1992-1996

2002-2006

2010-2014


14% 17%

37%28%

31% 59%

Positive establishment growth Negative establishment growth No data

As a result, the majority of U.S. counties had fewer business establishments in 2014 than

they did in 2010, despite five years of national recovery. These counties were home to

nearly one-third of the U.S. population. In contrast, the counties seeing negative

establishment growth in the 1990s were home to only 14 percent of the U.S. population.

Only one-quarter of all counties added business establishments at the same rate as the national economy.

IV.

The recessions of the early 1990s and 2000s were followed by robust and widespread

increases in business establishments. For example, following the 1991 recession,

fully half of all counties saw the number of business establishments rise at least as

fast as nationally (6.7 percent growth). By the 2010s, not only had the national rate of

business establishment growth fallen to 2.3 percent, but only one-quarter of all

counties reached that much lower bar.


53%

15%59%

83%

81%

77%

53%

22% 81%28%

12%

53%

41%

38%

34%

48%

82%

4%

10%

50%

0%

12%

52%

22%40%

81%

73%

67%

13%

85%

27%

34%

31%39%

45%12%

20%

0%0%57%0%10%

36%0%

100%

20% 14% 39%

29%

41%

16%

Figure 7. Share of state population living in counties where establishment growth matched or exceeded the national rate (2010-2014)

0%

20%

40%

60%

1992-1996 2002-2006 2010-2014

50%

29%25%

Figure 6. Share of U.S. counties matching or exceeding national establishment growth rates

However, the share of the country’s population living in such counties actually rose

from 40 percent in the 1990s to 43 percent in the 2000s and 48 percent in the 2010s.

This reflects a steady consolidation of new business establishments into more

populous locales over the course of the past three recoveries.

The counties growing new business establishments at

least as fast as the country as a whole from 2010 to 2014

were relatively concentrated geographically. In only

17 (mostly Western) states did a majority of residents

live in these high-growth counties. The list included

Massachusetts, New York, and the District of Columbia

in the East; Florida in the South; and Missouri in the

Midwest. The majority of the population in 33 states

plus the District of Columbia, meanwhile, were living

in counties lagging behind the national growth rate.


Increase in Est.

14,540

6,790

6,510

5,990

4,430

4,210

4,160

3,790

3,610

3,010

2,980

2,960

2,900

2,890

2,700

2,630

2,600

2,430

2,330

2,190

Twenty counties alone generated half of the country’s new business establishments.

V.

The U.S. economy is becoming far more reliant on a small number of super-performing

counties to generate new businesses. A mere 20 counties accounting for only 17 percent

of the U.S. population were responsible for half of the net national increase in business

establishments from 2010 to 2014.

20 COUNTIES GENERATED HALF OF NET NEW ESTABLISHMENTS

Rank Metro Area Population RankCounty

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Los Angeles County, CA

Miami-Dade County, FL

Kings County, NY (Brooklyn)

Harris County, TX

Orange County, CA

Queens County, NY

San Diego County, CA

Travis County, TX

Palm Beach County, FL

Broward County, FL

Maricopa County, AZ

Cook County, IL

Santa Clara County, CA

Collin County, TX

Orange County, FL

Tarrant County, TX

San Francisco County, CA

Clark County, NV

New York County, NY

Dallas County, TX

Los Angeles

Miami

New York

Houston

Los Angeles

New York

San Diego

Austin

Miami

Miami

Phoenix

Chicago

San Jose

Dallas

Orlando

Dallas

San Francisco

Las Vegas

New York

Dallas

1

8

7

3

6

10

5

39

28

18

4

2

17

73

35

15

67

13

20

9

Figure 8. The 20 counties that generated half of net new business establishments in the United States from 2010 to 2014


These counties contained many of the nation’s largest cities and were clustered

around its largest metropolitan areas; the country’s 10 most populous counties were

all represented on the list. Other leaders in Texas and the Bay Area punched well

above their weight thanks to rapidly growing economies. Major urban counties as

well as those in South Florida tend to be home to large foreign-born and immigrant

populations too — groups that are disproportionately likely to start new businesses.

Nevertheless, the concentration of half of the recovery’s net new business

establishments into only 20 counties represents a massive

and historically unprecedented imbalance in the

geography of business creation.

Previous recoveries saw many more counties drive

national establishment growth. In the 2000s, 64 counties

accounted for half of the net increase in business

establishments nationwide. Florida and the Southwest

accounted for much of the country’s new business activity

in this era, which was characterized by migration to new

suburban developments in the Sun Belt.

The proliferation of new business establishments was even

more dispersed in the 1990s, when it took 125 counties to

generate half of the United States’ new business

establishments. As recently as two decades ago, the

counties containing Akron, OH, Milwaukee, WI, and St. Louis, MO were among the

highest-volume generators of new business establishments in the country. From

Portland, ME, to Baton Rouge, LA, new business establishments were being

generated at scale in every corner of the country in this era; only California appeared

underrepresented on the map.

1992-1996 2002-2006 2010-2014

125

64

20

Figure 9. Number of counties accounting for half of recovery-era establishment growth


OF NEWEST.

50%OF THE

POPULATION

17%COUNTIES20

OF NEWEST.

50%OF THE

POPULATION

17%COUNTIES20

OF NEWEST.

50%OF THE

POPULATION

17%COUNTIES20

2010-2014

OF THE JOBS

50%OF THE

POPULATION

27%COUNTIES64

OF THE JOBS

50%OF THE

POPULATION

27%COUNTIES64

OF NEWEST.

50%OF THE

POPULATION

17%COUNTIES20

2002-2006

OF THE JOBS

50%OF THE

POPULATION

32%COUNTIES125

OF THE JOBS

50%OF THE

POPULATION

32%COUNTIES125

OF NEWEST.

50%OF THE

POPULATION

17%COUNTIES20

1992-1996

Figure 10. Map of counties accounting for half of recovery-era establishment growth


An unprecedented number of counties continued to lose jobs during the 2010s recovery.A majority of the population lives in counties that lagged behind the national rate of job growth.Fifty percent of 2010s job growth accrued to only 2 percent of U.S. counties.The geography of high-quality job growth was uneven.

I.II.

III.IV.

Employment gains from 2010 to 2014 were far more geographically concentrated than in previous recoveries.

An unprecedented number of counties continued to lose jobs during the 2010s recovery.

I.

The U.S. economy added 9.1 million new jobs from 2010 to 2014, compared to 7.5

million over the first five years of the 2000s recovery and 9.4 million over the first

five years of the 1990s recovery. Those figures represented job growth rates of 10.1

percent in the 1990s, 6.7 percent in the 2000s, and 8.1 percent in the 2010s.

As with business establishments, the geography of job growth has narrowed from

one recovery to the next. Following the 1991 recession, only 14 percent of counties

continued to post job losses over the course of the next five years. That proportion

rose to 28 percent in the 2000s and to 31 percent in the 2010s (three-quarters of

which lost population at the same time). In other words, the share of U.S. counties

participating in national jobs recoveries has fallen from 86 percent in the 1990s to

72 percent in the 2000s and only 69 percent in the 2010s. The share of the country’s

population living in bypassed counties varied but was relatively low in each period:

During both the 1990s and 2010s recoveries, 11 percent of the population lived in

counties that continued to lose jobs. Over the 2000s, when manufacturing

employment losses pummeled more populous corners of the Great Lakes, more

than one in five Americans lived in counties that were bypassed by the national jobs

recovery.

Job growth has remained consistently more pervasive than business establishment

growth across counties over time. This is likely due to the fact that firms respond to

changing economic conditions by shrinking or expanding their workforces before

closing or opening entire establishments, which represent costly sunk investments.


Positive job growth Negative job growth No data

A majority of the population lives in counties that lagged behind the national rate of job growth.

II.


1992-1996

2002-2006

2010-2014


14% 17%

37%28%

31% 59%


1992-1996

2002-2006

2010-2014


14% 17%

37%28%

31% 59%


1992-1996

2002-2006

2010-2014


14% 17%

37%28%

31% 59%PERCENTAGE OF COUNTIES

LOSING JOBS

1992-1996

2002-2006

2010-2014


14% 17%

37%28%

31% 59%


1992-1996

2002-2006

2010-2014


14% 17%

37%28%

31% 59%


1992-1996

2002-2006

2010-2014


14% 17%

37%28%

31% 59%

Figure 11. Percent of counties losing jobs during national recoveries

Figure 12. Net change in employment from 2010 to 2014

Changes in population alone do not explain the geographic shift in employment and

establishment growth. In practice, the share of U.S. counties experiencing population

decline increased from 22 percent in the 1990s to 35 percent in the 2000s and 54

percent in the 2010s. However, roughly one-third of the counties that lost business

establishments and one-quarter of the counties that lost jobs in the 2010s actually saw

an increase in population. Furthermore, more than one in five counties that lost both

jobs and establishments nevertheless saw their populations rise over the same period.

The number of counties seeing job growth at or above the national rate has dwindled

over the past the three recoveries. During the 1990s, 58 percent of counties enjoyed

at least as rapid job growth as the country as a whole. By the 2010s, however, only 28

percent of counties saw faster job growth than the national economy.


Nevertheless, the number of people living in such counties

has held relatively steady between 43 and 46 percent —

implying again that the counties experiencing heady growth

are increasingly the more populous ones. In every period,

however, a majority of the country’s population lived in

counties with lagging job growth.

In only 12 states did a majority of residents live in a county

that saw employment increase at least as fast as it did

nationally from 2010 to 2014. Three of those states —

Arizona, Florida, and Nevada — were epicenters of the

housing crash. Others — North Dakota, Oklahoma, and Texas — benefitted from the

energy boom, which has already started to dissipate. California, Colorado,

Minnesota, Oregon, and Utah round out the list — all places benefiting from

technology and high-end service sector-led growth.

49%

27%52%

78%

24%

78%

62%

31% 71%58%

19%

24%

27%

13%

26%

8%

72%

24%

14%

37%

0%

33%

52%

42%49%

87%

72%

61%

6%

77%

22%

33%

42%39%

30%27%

7%

4%5%18%10%3%

16%2%

0%

24% 16% 45%

40%

47%

16%

Figure 14. Share of state population living in counties where job growth matched or exceeded the national rate (2010-2014)

Figure 13. Share of U.S. counties matching or exceeding national job growth

0%

20%

40%

60%

1992-1996 2002-2006 2010-2014

28%

44%

58%


Fifty percent of 2010s job growth accrued to only 2 percent of U.S. counties.III.

Half of the 2010s recovery’s 9.1 million new jobs accrued to only 73 counties, which

together contained only 34 percent of the population and 39 percent of the nation’s

employment base. Job creation was much more distributed during the 2000s, when

120 counties together produced half of all net new jobs, and during the 1990s, when

107 counties contributed to this benchmark.

COUNTIES WITH LARGEST INCREASE IN EMPLOYMENT

Rank Metro AreaIncrease in

EmploymentEmployment Growth Rate

PopulationGrowth RateCounty

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Los Angeles County, CA

Harris County, TX

New York County, NY

Cook County, IL

Orange County, CA

Dallas County, TX

Miami-Dade County, FL

Santa Clara County, CA

Maricopa County, AZ

San Diego County, CA

King County, WA

Hennepin County, MN

Tarrant County, TX

San Francisco County, CA

Oakland County, MI

Travis County, TX

Kings County, NY (Brooklyn)

Orange County, FL

Hillsborough County, FL

Mecklenburg County, NC

Los Angeles

Houston

New York

Chicago

Los Angeles

Dallas

Miami

San Jose

Phoenix

San Diego

Seattle

Minneapolis

Dallas

San Francisco

Detroit

Austin

New York

Orlando

Tampa

Charlotte

352,840

257,940

220,200

165,680

148,840

130,240

117,750

116,050

115,960

101,260

97,660

89,460

84,310

82,600

77,030

73,610

73,550

68,850

68,040

66,610

9.9%

14.7%

11.2%

7.6%

11.7%

10.6%

14.7%

13.7%

8.2%

9.2%

9.8%

11.4%

12.5%

16.8%

13.2%

15.6%

15.0%

11.7%

13.9%

13.2%

2.9%

8.3%

3.0%

1.0%

4.2%

6.2%

6.4%

6.1%

6.9%

5.2%

7.5%

5.0%

7.1%

5.8%

3.1%

11.7%

4.4%

9.4%

6.8%

9.6%

Figure 15. The 20 counties with the largest absolute increase in employment from 2010 to 2014


In each period, the counties responsible for half of the country’s job growth together

contained roughly one-third of the country’s population. The U.S. economy relied

on fewer but generally more populous counties to generate the bulk of the 2010s jobs

recovery than in the past. This could represent a deeper shift in the mix of

industries driving the country’s economic growth towards ones that thrive in larger

urban agglomerations. It could also reflect that larger (and presumably more

diversified) counties were better equipped to bounce back from this exceptionally

deep recession.

Indeed, many of the counties with the highest volume job growth were also the

country’s largest. Others specialized in fast-growing technology or energy industries,

and all together, of the 20 counties that generated the largest absolute increase in

employment, 19 posted faster job growth than the country as a whole (8.1 percent).

As Figure 15 on the previous page shows, job growth far outpaced population growth

in all 20 of the counties with the largest absolute increase in employment.

Each map of the counties leading the past three recoveries

(Figure 17) captures a distinct era in a constantly evolving

U.S. economy. The 2010s map is clearly urban in orientation

and the sparsest of the three. The 2000s map, by contrast, is

much fuller and heavily oriented towards Florida, the

Southwest, and outlying counties on the Eastern Seaboard,

while manufacturing losses served as a drag on job growth

in the Midwest. The 1990s map is much more balanced

geographically. In that era, the Bay Area and Boston reaped

the rewards of the first information technology boom; the

Mountain West was being settled; and from Little Rock, AR,

to Greenville, SC, the Southeast was one of the country’s

strongest engines of job creation. To an even greater extent

than with business establishment growth, the Rust Belt

fueled the nation’s 1990s employment expansion: The counties containing Akron,

Cleveland, Cincinnati, Columbus, and Dayton, Ohio, all joined a large national

network of peers to deliver half of the economy’s new jobs.

Figure 16. Number of counties accounting for half of recovery-era job growth

1992-1996 2002-2006 2010-2014

107120

73


73COUNTIES OF THE

POPULATION OF NEW JOBS

34% 50%

73COUNTIES OF THE


34% 50%

73COUNTIES OF THE


34% 50%

2010-2014

OF THE JOBS

50%COUNTIES120

OF THE POPULATION

33%

OF THE JOBS

50%COUNTIES120

OF THE POPULATION

33%

73COUNTIES OF THE


34% 50%

2002-2006

OF THE JOBS

50%OF THE

POPULATION

33%COUNTIES107

OF THE JOBS

50%COUNTIES120

OF THE POPULATION

33%

73COUNTIES OF THE


34% 50%

1992-1996

Figure 17. Map of counties accounting for half of recovery-era job growth


Industry

00-2.5M -1.25M 1M

RECESSION- AND RECOVERY-ERA CHANGES IN EMPLOYMENT

Average PayChange in Employment

2008-2010Change in Employment

2010-2014

Agriculture, forestry, fishing and hunting

Mining, quarrying, and oil and gas extraction

Utilities

Construction

Manufacturing

Wholesale trade

Retail trade

Transportation and warehousing

Information

Finance and insurance

Real estate and rental and leasing

Professional, scientific, and technical services

Management of companies and enterprises

Admin, support, and waste mgmt. services

Educational services

Health care and social assistance

Arts, entertainment, and recreation

Accomodation and food services

Other services (except public administration)

$39,500

$93,100

$96,500

$56,000

$56,000

$67,800

$26,500

$47,100

$87,300

$93,300

$49,300

$77,200

$108,200

$37,400

$36,400

$45,600

$33,300

$17,900

$30,200

Middle-wage workers suffered the starkest change in circumstances due to the 2009

recession — a reality that plays out in local labor markets across the United States.

Fully half of the 8.9 million jobs lost from 2008 to 2010 were in middle-wage sectors,

36 percent in low-wage sectors, and 14 percent in high-wage ones. Half of the

recovery’s 9.1 million jobs, however, were in low-wage sectors, and only 31 percent

were in middle-wage sectors and 19 percent in high-wage ones.4 As a result, by the

end of 2014, the economy had recovered only three out of every five middle-wage

jobs lost to the recession. That left a gap of 1.8 million missing middle-wage jobs.

An analysis of four leading job-growth counties reveals that the quality of jobs

generated by the recovery varies geographically, too.

The geography of high-quality job growth was uneven.IV.

4. The 19 major sectors of the U.S. economy were classified into high-wage (over $70,000 average annual wage in 2014), middle-wage (between $40,000 and $70,000), and low-wage (below $40,000) sectors for this analysis.

Figure 18. Sectoral composition of recession- and recovery-era changes in employment


MARICOPA COUNTY, AZ

Construction

Manufacturing

Retail trade

Transportation


Real estate

Professional services

Management

Admin and support

Education

Health care

Arts and entertainment

Accomodation and food

Other services

Wholesale trade

Information

7,451

5,858

-766

3,067

13,115

-6,202

9,006

1,773

13,552

3,509

18,157

1,220

13,602

35

4,530

29,441

ORANGE COUNTY, FL

Construction

Manufacturing

Wholesale trade

Retail trade

Transportation

Information


Admin and support

Education

Health care



Other services

Real estate


Management

2,540

665

2,117

15,124

2,660

2,915

281

-2,668

-2,503

-2,124

9,411

2,741

5,034

9,372

1,182

21,726

HENNEPIN COUNTY, MN

Construction

Manufacturing

Retail trade

Transportation

Information


Real estate


Management

Admin and support

Education

Health care



Other services

Wholesale trade

35,565

2,034

2,668

4,883

174

651

3,923

1,886

4,575

10,304

1,940

8,032

2,315

9,483

1,323

-783

KING COUNTY, WA

Construction

Manufacturing

Wholesale trade

Retail trade

Transportation

Information


Real estate


Admin and support

Education

Health care



Other services

Management

14,852

12,807

14,349

6,751

2,498

9,331

8,898

2,148

855

9,307

-6,924

8,242

2,231

6,509

3,096

2,071

Figure 19. Employment change by sector in four illustrative high-growth counties (2010 to 2014)


In Orange County, FL (Orlando), for example, almost all new jobs appeared in the

low-wage accommodation and food services, retail, arts and entertainment, and

administrative services sectors. In Sun Belt cousin Maricopa County, AZ (Phoenix),

job growth was more diversified, with high-wage professional services and finance

and middle-wage construction, manufacturing, and transportation all growing too.

Advanced industry-heavy King County, WA (Seattle), for its part, saw some of its

strongest job growth in middle- and high-wage construction, manufacturing,

information, and professional services sectors. Meanwhile, white-collar,

headquarters-heavy Hennepin County, MN (Minneapolis), saw almost all growth

take place in the very high-wage management sector with only modest expansions

elsewhere. These four profiles suggest that baseline levels of low-wage job growth

were a nationwide hallmark of the 2010s recovery, while the distribution of new

high-paying jobs remained much more uneven.


The largest counties produced 58 percent of the country’s new business establishments.The largest counties produced more than twice as many jobs during the 2010s recovery as they did in past ones.The most populous counties have become the fastest growing.Only 15 large counties enjoyed their strongest recovery in the 2010s.

I.II.

III.IV.

The country’s most populous counties powered the 2010s recovery.

The largest counties produced 58 percent of the country’s new business establishments.

I.

New business establishments consolidated into the country’s largest markets over the

2010s to an extent not seen during prior recoveries. In the 1990s, counties with under

500,000 people generated 71 percent of all new business establishments — a total of

nearly 300,000. By the 2010s, counties with over 500,000 people had become

dominant, generating 81 percent of all new business establishments — despite

housing only 47 percent of the country’s population. Were it not for these relatively

few pockets of resiliency, the U.S. economy would have seen near-total stagnation in

its business landscape.

2002-2006

Under 100,000 people Between 100,000 and 500,000 people

Between 500,000 and 1 million people Over 1 million people

20% 40% 60% 80% 100%0%

15%

1992-1996

19% 23% 58%

36% 20% 29%

2010-2014

32% 39% 16% 13%

Figure 20. Share of net U.S. establishment creation by county size class


The largest counties produced more than twice as many jobs during the 2010s as they did in past recoveries.

II.

In total, counties with over one million people added 99,000 of the country’s 165,000

net new business establishments from 2010 to 2014. Meanwhile, counties with under

100,000 people saw a sharp reversal from the 1990s, swinging from a net increase of

135,000 business establishments from 1992 to 1996 to a net decrease of 17,500

establishments from 2010 to 2014. The steep drop-off in new establishment openings

in small and mid-sized counties is responsible for much of the national-level collapse.

Over prior recoveries, large counties did not play a central role in delivering the

country’s employment growth. This is no longer the case. The most populous U.S.

counties — those with over one million people — created 3.3 million jobs over the

2010s recovery, more than any other size class of counties and more than twice as

many jobs as they created over each of the two prior recoveries. By contrast, counties

with under 100,000 people collectively created fewer than one million new jobs in the

2010s — substantially fewer than 2.5 million they created from 1992 to 1996 and the

1.2 million new jobs they created from 2002 to 2006. As a result, the 2010s recovery

has served to accelerate a shift in the country’s economic gravity towards populous

counties after decades of decentralizing growth that spread economic activity to more

locales.

100%

Figure 21. Share of net U.S. job creation by county size class

2002-2006

Under 100,000 people Between 100,000 and 500,000 people

Between 500,000 and 1 million people Over 1 million people

20% 40% 60% 80%0%

20%

1992-1996

9% 26% 23% 41%

39% 19% 23%

2010-2014

27% 36% 16%21%


The most populous counties have become the fastest growing.III.

In a recovery that brought economic development disproportionately to those

places lacking it, small counties would post higher growth rates than larger ones. On

the other hand, in a recovery that reinforced or even accelerated the concentration of

economic activity into existing economic centers, large counties would post higher

growth rates than smaller ones. And indeed, the 2010s recovery was distinguished by

the largest counties registering the fastest growth rates on average.

This development directly challenges the conventional wisdom that growth rates in

larger and highly developed cities are by nature slower than growth rates in smaller

and less developed ones (just as at the country level one does not expect the United

States to post as high of growth rates as China). It also challenges the basic tenants of

economic geography that suggest that economic activity will spread from high cost,

congested locales to low cost ones as a matter of course. Ultimately, it implies that the

knowledge- and technology-driven industries that power modern growth have very

different — perhaps even more than already recognized — locational requirements

from the industries that led past eras of growth.

Figure 22. Average establishment growth rates by county size class

Figure 22 depicts the dramatic shift in the type of counties generating new enterprise.

In the 1990s, the smallest counties added business establishments at the fastest rate,

while the largest counties trailed the pack. Those same counties saw growth fall

precipitously over the 2000s recovery, though. By the 2010s, all counties with fewer

than one million people averaged far lower establishment growth rates than in the

past. In contrast, the 39 counties with over one million people posted average

establishment growth rates more than twice as high as the national 2.3 percent.

10%

6%

2%

8%

4%

0%

-2%1992-1996 2002-2006 2010-2014

6.3%

5.1%

6.7%

2.0%

3.8%

5.2%

8.8%9.0%

4.8%

1.2%

-1.0%

Under 100,000 Between 100,000 and 500,000 Between 500,000 and 1 million Over 1 million

National Average

2.6%


1992-1996 2002-2006 2010-2014

Under 100,000 Between 100,000 and 500,000 Between 500,000 and 1 million Over 1 million

18%

14%

10%

4%

16%

12%

8%

2%

6%

0%

16.0%

13.3%

9.4%

7.7%

4.9%

6.7%7.4%

9.9%

6.4%

8.5%

5.0% 5.2%

Figure 23. Average employment growth rates by county size class

Meanwhile, the smallest counties saw more business establishments close than open,

resulting in a -1.0 percent average growth rate — despite the energy boom that lifted

many corners of rural America over the period.

The same pattern holds for job growth. The economic expansion of the 1990s was fueled

by economic development spreading to more locales — a “rise of the rest” story — that

disproportionately benefitted smaller counties. Counties under 100,000 people

averaged 16 percent job growth during the 1990s recovery, while counties over one

million averaged only 7.7 percent job growth over the same period. Nationally,

employment increased by 10.1 percent.

The 2000s recovery was characterized by an overall convergence in growth rates

across size classes even as mid-sized counties pulled ahead as the era’s job growth

leaders. By the 2010s, the largest counties were growing faster than any other group,

averaging 9.9 percent job growth — their fastest in recent history — and reinforcing

the concentration of the nation’s economic activity within them. Average job growth

rates in smaller counties, meanwhile, had fallen to their lowest levels in recent

decades.

National Average


LARGE COUNTIES EXPERIENCING THEIR STRONGEST RECOVERY IN THE 2010s

County State2010s

Job Growth2000s

Job Growth1990s

Job Growth2010s

Est. Growth2000s

Est. Growth1990s

Est. Growth

Alameda County

San Francisco County

San Mateo County

Santa Clara County

Denver County

Miami-Dade County

Hudson County

Passaic County

Bronx County

Erie County

Kings County (Brooklyn)

Monroe County

Queens County

Allegheny County

Harris County

CA

CA

CA

CA

CO

FL

NJ

NJ

NY

NY

NY

NY

NY

PA

TX

10.7%

16.8%

11.8%

13.7%

12.6%

14.7%

2.5%

4.9%

8.0%

4.3%

15.0%

3.4%

11.0%

6.2%

14.7%

-3.6%

-0.9%

10.0%

-1.0%

3.4%

5.9%

-6.2%

-3.6%

5.2%

1.6%

10.5%

0.1%

2.4%

-1.7%

4.3%

8.5%

5.7%

6.1%

9.9%

5.5%

8.2%

-5.1%

-1.0%

-4.6%

2.8%

2.5%

1.6%

1.7%

1.3%

6.1%

5.2%

8.5%

5.0%

6.6%

6.8%

9.2%

4.2%

2.5%

6.8%

0.8%

13.5%

2.4%

9.7%

0.8%

6.5%

2.0%

1.7%

1.5%

2.1%

3.5%

9.0%

-1.0%

1.2%

3.0%

0.2%

7.4%

1.2%

6.5%

0.2%

4.7%

0.9%

1.3%

3.9%

4.7%

2.5%

5.4%

-3.3%

1.6%

0.3%

0.5%

4.6%

0.4%

3.9%

-0.4%

5.1%

Only 15 large counties enjoyed their strongest recovery in the 2010s.IV.

Despite the pervasiveness of large county growth, only 15 counties of the roughly 130

with over 500,000 people posted both their strongest job growth and their strongest

establishment growth of the past three recoveries in the 2010s. Four Bay Area and

five New York City area counties were in the group, counterintuitively placing the

country’s highest cost and most congested locales as some of its fastest growers.

Also in the mix are signs of hope in some Rust Belt communities: Erie County, NY

(Buffalo), Monroe County, NY (Rochester), and Allegheny County, PA (Pittsburgh)

also rose to the list of places thriving most relative to their own pasts, alongside

Denver County, CO, and Harris County, TX (Houston). Nevertheless, the relative

shortness of the list makes clear that, although the 2010s recovery was led by cities,

many still underperformed relative to their own recent histories. The headwinds

affecting the national economy — notably the collapse in new business formation —

continued to batter most of the nation’s cities, hemming in national growth, as well.

Figure 24. List of 15 counties with more than 500,000 people that experienced their strongest recovery-period job and business establishment growth in the 2010s


CONCLUSION

The United States has undoubtedly enjoyed more robust GDP and job growth

following the global financial crisis than most developed economies. Its relatively

swift recovery is a sign of national resilience. However, in light of the findings

presented here, that resilience seems due more to the dynamism of its major

metropolitan centers than to grassroots economic vibrancy nation-wide.

The geographically uneven nature of the decline in new business

starts implies that large swathes of the country will soon contend

with a missing generation of firms — ones that should be provid-

ing employment opportunities and new foundations for economic

growth in the years ahead. The uneven geography of new business

formation tracks very closely with that of access to capital —

particularly venture and other forms of risk capital. Addressing the

former challenge will surely involve tackling the latter. Without

mitigating these disparities, the trend towards increasing

concentration documented here may even accelerate, given that

today’s largest economic centers are the few remaining places

producing tomorrow’s new businesses.

The dynamics captured in this report result to some extent from a global trend

towards the clustering of knowledge-based economic activity (the modern economy’s

growth sector) in large, connected cities. People are following economic

opportunity to cities as well — the share of the country’s population residing in

counties left behind by economic recoveries has not significantly increased over time.

Such macro trends are neither inherently negative nor in need of mitigation. They do

suggest, however, that people and places on the wrong side of the trajectory of

economic change may need assistance to adjust and cultivate new competitive

advantages.

The new map of growth and recovery points to very different futures for American

communities. These findings suggest that the gains from growth have and will

continue to consolidate in the largest and most dynamic counties and leave other

areas searching for their place in the emerging economic landscape. While many

will benefit, the new map also calls for a new toolkit for ensuring broad access to

opportunity and helping both people and places realize their economic potential.

The new map of growth and recovery calls for a new toolkit for ensuring broad access to opportunity and helping both people and places realize their economic potential.


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THE NEW MAP OF ECONOMIC GROWTH AND …At the national level, a scarcity of new businesses implies a future of reduced economic dynamism. New businesses play a disproportionate role